JP: PMI Manufacturing Index Flash

Thu Jun 22 19:30:00 CDT 2017

Actual Previous Revised
Level 52.0 52.0 53.1

The flash estimate for the Japan manufacturing PMI headline index in June is 52.0, down from the final estimate of 53.1 for May (revised from a flash estimate of 52.0). If confirmed by final data to be released early next month, this will indicate that activity in the Japanese manufacturing sector has expanded for a tenth consecutive month but at the weakest pace since November.

This drop in the headline index is the first since March and reflects a sharp decline in the survey's output index, down from 54.0 to 52.1, the lowest level in nine months. Survey respondents also reported slower - though still positive - growth in new orders, new export orders, and employment in June. Despite these signs of weaker activity in the manufacturing sector, the survey indicates that price pressures have strengthened since the start of the month, with respondents reporting that both input costs and selling prices have increased at a faster pace than in May.

Despite the fall in the headline index, the PMI survey continues to point to a solid expansion in Japanese manufacturing. Although the index was revised markedly higher in May, the final estimate has generally been close to the flash estimate in recent months.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current month.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.